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J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

Professor DeLong makes a number of revealing points in support of his policy no-brainers. First, the rule of law must yield to Lord Keynes’ commandment: “when demand is low, Caesar must spend.” Using the clever lawyers to cover the flank of the central bank, while the rest of government turns a blind eye to actions that go beyond the bank’s traditional legal authority, seems a far better way to rid a nation of the rule of law than following Dick the Butcher’s advice to kill them all. Second, the economic science is settled. As a result, disinterested technocrats, rather than elected representatives, should answer the simple question of how much unlawful stimulus the central bank should provide. And third, there is no legitimate objection to these policies or the means necessary to implement them. After all, the opponents are irrational, antediluvian reactionaries or Southern Republicans resentful over the central government’s role in the abolition of slavery and vindication of civil rights. We should all thank Professor DeLong for stating his progressive views so clearly.

If the fiscal multiplier is really 2, then why didn't the stimulus package result in about $1.6 trillion in added GDP, and why didn't annual deficits that peaked at 10% of GDP or $1 trillion result in a boom? Or why hasn't Japan's multi-decade stimulus/infrastructure program that has raised it debt to twice its GDP not ended its deflation experience? And are you implying that Southerners are racists because they are more conservative? As the song says, the Southern man don't need you around anyhow.

The immediate crisis can be addressed with helicopter money.
But WHY are we in Secular Stagnation? Even Larry Summers - who named the situation - has not a clue. How about, Dr. DeLong, addressing that?

To Paul Friesen: Actually there is plenty of money in the world economy. The global savings glut has not alleviated. At least partially this glut is created by the trade imbalances. The trade surplus countries are not spending enough and are hording the excess money in huge currency reserves that slosh around the world blowing bubbles in financial assets, real estate, etc.

@ Steve Hurst,
Steve, my question is WHY are those things happening. It is actually a rhetorical question but I didn't want to give away the answer to Dr. DeLong.
So, can you explain WHY the things you describe are happening?

It's simply a case of not having enough money in the world economy. Not enough money means that there is not enough spending to generate full employment. And it is just crazy that we can't seem to figure out how to fix that.

@Gene
If you offshore well paid jobs, import deflation thru substantially cheaper goods manufactured in the Far East, add to the labour force by defering retirement, up the welfare and helthcare bill due to aging demographics, trend youth unemployment upwards so that group is broke, then you are not exactly going to be living in a bouncy castle. BTW some countries dont let this strip-out happen on their patch, for example China said to aeroplane majors if you want access to our market you make planes here. So they sacked a whole load of skilled workers in the West and made planes in China. Now what the West should have said is if you want access to our market you keep making planes here, particularly as the whole basis of the technology has been government development funding for military use

Helicopter money if delivered in large enough quantities would be highly inflationary. Before we employ strategies so radical why don't we just reduce FICA for a couple of years. More money in the consumers hands and it goes to those who work. You could even incentivize new hires by giving businesses tax credits for the new hires.

Why exactly should we borrow money from the rich? We just pay it back with interest to people who already control the political, regulatory and judicial system. Let's do something that will solve that problem as well as the economic problem.

We tax the rich heavily to redistribute money. We print more money to pay for upgrades to our lives. The money migrates upward, but the taxes feed it back to the system. As that happens, we can reduce the money printing.

"Faced with this, my former teacher and long-time colleague Barry Eichengreen has become positively alarmed: “The world economy is visibly sinking, and the policymakers who are supposed to be its stewards are tying themselves in knots.”"

How ignorant and naive can someone possibly be to, beyond the age of 8 years old, still believe in Santa Claus? Oh, and that he doesn't actually live and work at the North Pole, but in Washington, DC?

Theoretically, everything stated in this article has been completely refuted and debunked decades ago. Through experience, MMT, Keynesianism and the socialist/welfare union thuggery state has proved to be a failed and miserable experiment, is a complete fraud and has no net long-term impact other than to create the most massive income and wealth inequality in the history of mankind.

Channeling Milton Friedman and Winston Churchill must be difficult for you. I can't imagine what smoking cigars and slurping down borscht at the same time could be like let alone arm wrestling with Hitler and rubbing shoulders with Pinochet. But then again I imagine coping with multiple contradictions is not too traumatic for one inhabiting multiple personalities. I guess both Hitler and Pinochet would not have sat too comfortably in the same room with a Soviet, so I can understand your fierce invective.

"It is time for central banks to assume responsibility and implement “helicopter money,” putting cash directly into the hands of people who will spend it. "

Is this such a good idea?
You give money to people who will more than likely spend it on imports (TVs, clothes) or perhaps even socially non desirable consumption - alcohol, gambling.
Why not put it in the hands of government which hopefully would direct it to infrastructure, education, health, technology. Mistakes will be made but compared to leakages to outside of the domestic economy, they are tolerable.

Channeling Milton Friedman and Winston Churchill must be difficult for you. I can't imagine what smoking cigars and slurping down borscht at the same time could be like let alone arm wrestling with Hitler and rubbing shoulders with Pinochet. But then again I imagine coping with multiple contradictions is not too traumatic for one inhabiting multiple personalities. I guess both Hitler and Pinochet would not have sat too comfortably in the same room with a Soviet, so I can understand your fierce invective

Good column. It is past high time for central banks and their governments to read and apply "Functional Finance" by Abba Lerner (1943). The world doesn't need to go into debt to counter deficient demand. Incidentally, someone needs to remind the reading public that politicians are not bound to "misuse" newly-created money. If they run deficits (however financed) when we are at full-employment, they will cause dandy inflation. The politicians will quickly discover that voters HATE inflation more than anything, and they will be voted out on the street as soon as the voters make the connection. This point needs to be made more widely. Thanks for your article!

1) What seems to be ordoliberalism may be a psychological defect. When you read a German decrying expansionary monetary policy, their arguments reduce to psychology, not logic. Much the same elsewhere. Thus, logic is not a very useful counter argument.
Psychologists are needed on this debate team.

2) The cure of this governmental dysfunction seems so elusive that it is not even proposed. May I suggest that, at least in the USA, it might be as simple as getting more economists to run for public office? I would think most red districts have some Republican economists who could be persuaded to run. The key is not to worry about winning any individual race but to keep competing for the office. Even some Demicratic districts would be improved with such a candidate. Mere probability suggests that if enough run enough will win to have an effect.

3) There are only two events that allow policy freedom - overwhelming political dominance and overwhelming crisis. In 2009 we had both and the administration had a free hand. Crisis wasted.

Sooner or later, those conditions will recur. At that point, it will be very beneficial to have detailed proposals already prepared and ready for implementation.

Interest rates are near zero because central banks participate in government bond markets, to ensure stability. Which is fine (leaving aside pedantic questions of what happens in the long run, as central banks end up dominating public finance).

For now, the author is right to ask why don't governments spend more?

The reasoning here seems a little thin, but I think in the ideal case, handing out cash to "those who are constrained in their spending by low incomes and a lack of collateral assets" sounds good.

The author should follow up on how the recipients would be divided among:
1. (disadvantaged) natural persons
2. (unprofitable) businesses whose activities are judged by the technocrats to have a positive impact
3. (unprofitable) businesses who are simply gaming the handout system.

Perfection is not necessary -- pure markets don't always generate the best choices here either. But I do think it's important to question the blind faith in the judgment of technocrats.

Yes it is a little bit insane. But the "economy", in the sense that it made up of material things, is doing mostly ok (there are problems with health care and infrastructure, but mostly, enough labor, enough material resources, enough homes, enough fancy goods, continued material progress, nobody starving) In the sense that the economy is an accounting system, and a system which directs the flow of work and money and what have you in a rational way, that part is broken. Ok, great, now what? Print money. Ok, great, traditional rebalancing methods are off the table for political reasons, little incentive to think outside the box here, so in a way, no other choices. Print money. Give it to large financial institutions? Not working. Step 2 - give it to smaller players. Why not?

You are talking about 'aid dependency' which is the whole process which has been in place since 2008. It is an addiction hard to break. It also erodes, it is the economic version of acid rain

This is straightforward insanity. The result; the voter, aka the taxpayer, has aid fatigue and is losing faith a the system based on promissory notes. 'Promising to pay the bearer the sum of ..' then becomes unbearable. It was currency debasement that collapsed the Roman Empire

The US is arguably the best in recovery having now crawled back to the baseline recently, the slowest recovery on record. It has achieved this by nominally doubling its national debt, some 3/4 up in real terms, so it certainly is not back were it started by measurement. If that doesnt ring alarm bells I dont know what will. The implication is more debt to stand still unless lucky.

JBD sounds like a gambler wanting to double up on his losses. 'As long as the interest rate at which a government borrows is less than the sum of inflation, labor-force growth, and labor-productivity growth, the amortization cost of extra liabilities will be negative' JBD. I agree, the question is what growth will occur and my suspicion is that is dependent on reform which is difficult to implement. Doubling the US national debt has not induced remarkable growth. Precisely what growth is expected thru debt.

Furthermore I would suggest much of the West is no longer a 'large industrial eocnomy' as offshoring has resulted in a two speed scenario where there are reduced numbers of well paid technology workers and an increasing base of low paid low skilled, aka inequality. As such claiming Keynesian multipliers of 2 is quite likely optomistic. I would want to see a rigorous assessment of national debt growth vis a vis keynsian multiplier effect before I bought that

Well, yes, I think we're talking about constant helicopters here. I mean, QE, about on the order of $100B / month, was no small thing. Similar in EU and Japan.

I agree with you that QE has not "uplifted the game". I think Brad DeLong is in on that too, saying that while QE allowed governments to borrow cheaply and spend in the real economy, for whatever reason, rightly or wrongly, they aren't doing that to nearly the extent that they could at near-zero interest rates.

Ponzi scheme? Kind-of. To accept that is really an impressive capitulation of the free-market purists.

The alternative would be to allow a lot of the debt created during the bubble years to be written off. On the flipside of the ledger, a lot of the world's financial assets would be wiped out too. While I wouldn't cry too many tears for the biggest owners of these, a lot of ordinary people with retirement funds like 401k's are held hostage in the same boat, for one thing. So the traditional bankruptcy method of working out past mistakes is just too painful -- if you think voters in the US and EU are revolting now, imagine what would happen if you wiped out half the first world's retirement accounts.

That's the whole point of the break up the banks thing btw. Making the banks eat their mistakes isn't a realistic option for this generation (unless the government steps in to supply retirement benefits). So printing money , actively intervening in interest rate markets, and giving up on "free markets" is going to be it.

A helicopter money drop would evaporate in the morning breeze and simply be a blip on a graph, or it would become a constant with helicopters shuttling back and forth. Take your pick. Essentially it is QE in new clothes, and QE has not uplifted the game. Carney at the boE has said it is a Ponzi scheme and thats good enough for me.

Exactly right. Central banks should back out of asset markets, leave their past as banks for banks behind them, and begin distributing cash through loans or gifts directly to taxpayers and governments. That will supplement incomes and demand without creating the asset market distortions that have undermined the quality of investment and productivity throughout the developed world.

It's tonic to see Brad admit that "...this debate is no longer an intellectual discussion – if it ever was." For his part, what it resembles is hand-waving as vigorous (but not as rigorous) as calisthenics - in the 'rep' of one paragraph, he conflates central banks and constitutional fiscal functions and then calls in the thug lawyers to enforce it (does Coach Summers have a J.D. ?)

Brad and Barry should put their heads together and groom out all the matted tautologies and conflations framing the discourse that is their field and explore afresh and in novel terms what 'growth' actually means for a healthy human culture, since they seem to have abandoned or abstracted away any straightforward naturalistic concepts of 'money' or 'debt' on which you'd think they'd depend. They must be counting on the fluttering inflation fairy instead, probably because it's machinations are ihe historic norm for declining empires. Just admit it, explain to the donkey how the carrot works and how the progress of the produce cart is growth. Ahh, the magic and majesty of the market...

If a bank followed similar reasoning, expanding its balance sheet because the expected return on its assets was expected to exceed the expected return on its liabilities, in the hope of getting out of trouble, they would be liable to be regarded as "gambling for redemption" and closed down.

If this advice is not to be discounted as reckless, Brad DeLong needs to specify a debt limit beyond which the policy will not be pursued.

Can we think of a single instance in recorded history in which helicopter money has ended well? Granted, there's a first time for everything. But these episodes have tended to end in tears (if not worse), and I don't know of any reason that the current bunch of technocrats will have any more success than that achieved by technocrats in the past.

So your idea is the USA, population 319million (2014); the UK population 65million (2015); and Germany population 80 million (2015) -- total 464 million should via mainly public spending initatives rescue the world economy, population circa 7400 million

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